Australian shares are set to open higher, paced by a relief rally on Wall Street in the wake of the US midterm elections. ASX futures were up 42 points at 8.45am AEDT. The Australian dollar moved towards US73¢.

Shares on Wall Street were sharply higher with all three major benchmarks at least 2.1 per cent higher at the close.

The US listed shares of Atlassian surged as much as 8 per cent as techs overall rallied casting aside worries that the sector that has led the bull market to record highs was losing its allure.

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The US listed shares of both BHP and Rio were also higher, up 1.8 per cent and 1.2 per cent respectively.

"Moving past the uncertainty is positive," LPL Financial said in a post. "The market got what it expected, which—all else equal—is positive.

"Some investors like checks and balances that can take extremes out of play," LPL also noted. "The S&P 500 is now in the 12-month period post-midterms, and the S&P 500 has not been down in this period since 1946. Based on history, Republican presidents and a split Congress have been one of the best combinations for stocks, which have gained 15.7 per cent on average in this scenario based on the S&P 500."

In a comment published by The Hill, Allianz's Mohamed El-Erian said he was hopeful that the split Congress could open the door to a focus on infrastructure. "An infrastructure modernizing plan would be one of the ways to improve the probability of a more powerful cyclical-secular handoff."

Mr El-Erian's hope may already have been dashed.

In a wide-ranging, near 90 minute long news conference, President Donald Trump said the election results were "very close to complete victory"; aggressively challenged reporters who questioned him, including those from CNN and NBC; offered to work with Democrats in the House and alternately threatened them with a "warlike posture" if they chose to investigate him. He also mocked those Republican candidates who did not endorse him and who failed to win.

Soon after the news conference, Jeff Sessions resigned, as he said he was requested to do so, as attorney general, opening the door to a potential constitutional crisis if Mr Trump seeks to end the Russia election interference investigation.

The pan-European STOXX 600 benchmark earlier closed with a 1 per cent gain, near a three-day high, with all major country and sectoral indexes gaining between 0.5 per cent and 2 per cent on the day.

Spain's stock market closed at its highest since October 10, boosted mainly by its banking sector.

In early local news, APRA wants to lift banks' capital requirements in order to strengthen the financial system's ability to cope with shocks, Reuters reports.

The Australian Prudential Regulation Authority has proposed lifting total capital requirements for the country's four biggest lenders by four to five percentage points by 2023, in a discussion paper it released on its website.

APRA said banks could use any form of capital to meet the higher requirements and that it anticipated most of it would be tier 2 capital. "The proposed changes are expected to marginally increase each major bank's cost of funding," APRA said.

Goldman Sachs elevates local bankers: Goldman Sachs has three new partners in its local team. The trio are among 69 Goldman Sachs bankers, traders and asset managers to be invited to join the partner ranks globally

TD Securities on the Fed meeting: "The November FOMC meeting should pass without much market impact, as the Fed should remain on track for another hike in December but not signal any change in policy. The risk is for a modest dovish market interpretation from mark-to-market edits to the description of recent data in the statement.

"There is a small chance that the Committee will release information about its balance sheet deliberations, suggesting an earlier end to runoff than previously indicated. That would likely generate a more dovish market response."

Market Highlights

SPI futures up 42 points or 0.7% to 5905 at 8.40am AEDT

AUD +0.5% to 72.79 US cents

On Wall St: Dow +2.1% S&P 500 +2.1% Nasdaq +2.6%

In New York, BHP +1.8% Rio +1.2% Atlassian +7.7%

In Europe: Stoxx 50 +1.2% FTSE +1.1% CAC +1.2% DAX +0.8%

Spot gold +0.1% to $US1228.48 an ounce at 12.41pm New York time

Brent crude flat at $US72.10 a barrel

US oil -0.7% to $US61.79 a barrel

Iron ore -0.6% to $US75.27 a tonne

Dalian iron ore +0.6% to 512 yuan

LME aluminium +1.7% to $US1984.50 a tonne

LME copper -0.1% to $US6153 a tonne

2-year yield: US 2.96% Australia 2.04%

5-year yield: US 3.08% Australia 2.26%

10-year yield: US 3.23% Australia 2.72% Germany 0.44%

US-Australia 10-year yield gap at 8.19am AEDT: .51 basis points

From Today's Financial Review

Funds nurse wounds after 'hostile' month: Hedge funds are making no excuses for their poor performance in October, which was a bloodbath for most long-short strategies unable to overcome "hostile" conditions.

United States

A bucket of cold water for Democrats: Democrats had a big night, but it was not as big as what they'd hoped for as they took control of the House of Representatives and lost seats in the Senate.

Divided US wakes to gridlock, warfare: Americans are waking to another two years of gridlock and bitter partisan warfare under an emboldened Donald Trump after Democrats won control of the House but fell short of a "blue wave" landslide.

US stocks surged on Wednesday, as investors piled into growth sectors such as technology and healthcare.

The S&P technology sector rose 2.4 per cent, while the healthcare group gained 2.8 per cent as fears of stricter regulations curbing their growth eased.

"The uncertainty around the midterms is over, so the markets are rallying...we're not expecting any major policy implications over the next two years," said Massud Ghaussy, senior analyst at Nasdaq IR Intelligence in New York.

"Certain sectors will benefit or stand to lose based on compromise reached between the House and the White House, but the overall market impact will be limited."

Following a steep selloff in October, the S&P 500 remains down more than 5 per cent from its record high.

Among the laggards were luxury handbag maker Michael Kors Holding and beauty products maker Coty, which tumbled 14.3 per cent and 22.1 per cent, respectively, after both missed quarterly revenue estimates.

Europe

The chances of sealing a deal on Britain's withdrawal from the European Union this month are receding, Irish Prime Minister Leo Varadkar said on Wednesday, and the EU's Brexit negotiator called on Britain to make decisive choices.

EU sources have also told Reuters the bloc would need to see a breakthrough on Brexit within a week if its leaders were to endorse any deal with Britain this month.

The leaders had previously pencilled in a summit for mid-November to sign off on a deal with London. Negotiators from both sides, however, remain at odds over ways to guarantee there is no return of border controls on the frontier between Ireland and the British province of Northern Ireland.

"I do think that, with every day that passes, the possibility of having a special summit in November becomes less likely," Varadkar told reporters after meeting Finnish Prime Minister Juha Sipila.

Company results announcements drove the biggest movers on the STOXX 600, with Scout24, Ahold and Vestas rising rising by between 6.2 per cent and 7.6 per cent after strong updates. Adidas fell 3.6 per cent after the sportswear company cut its revenue target after a fall in sales in western Europe.

Weaker than expected revenue growth sent the world's biggest security firm G4S down nearly 18 per cent to its lowest since August 2016 for its worst day in seven years.

Spanish banks were in the spotlight after a government move to counteract a court ruling that would have forced customers to pay mortgage stamp duty, pledging to pass a law to oblige banks to pay the tax.

Banking shares, which had rallied initially on the court ruling, came off early highs after the government's announcement but largely held gains after it became clear that the new law would not be applied retrospectively.

Shares in Caixabank Sabadell, BBVA , Santander and Bankia were up by between 1.8 per cent and 4.1 per cent.

"The Supreme Court decision to maintain the status quo on the mortgage tax has removed a tail risk and restored the much-needed legal security for the banks to continue operating in the long-duration business of mortgage loans," broker Alantra said in a note.

Asia

China relationship tested on two fronts: The government's relationship with China faces a stiff test with a major foreign policy pivot towards the South-West Pacific and the rejection of the APA Group takeover.

China stocks ended a volatile session lower, with weak earnings and an uncertain economic outlook outweighing government pledges of support for wavering markets. At the close, the Shanghai Composite Index was 0.7 per cent lower at 2641.34 points. The blue-chip CSI300 index also lost 0.7 per cent.

Citic Securities dropped 2.4 per cent after the company reported a 28 per ent fall in net profit in October from a month earlier. An index tracking securities firms ended 1.9 per cent lower.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.3 per cent while Japan's Nikkei index closed down 0.3 per cent.

Currencies

Venezuela's inflation hits 833,997pc: Venezuela's consumer prices rose 833,997 per cent in the 12 months through October, according to a report by the opposition-controlled Congress.

The Federal Reserve starts its two-day monetary policy meeting on Wednesday (Thursday AEDT), where it is expected to keep interest rates unchanged, but a rate hike in December is largely priced in.

"The policy path implied by this outcome shifts the narrative away from rising rates at least temporarily," Morgan Stanley's Michael Zezas wrote in a client note.

"In the near term, that could alleviate the pressure that stocks have felt in recent weeks."

Germany's 10-year government bond yield - seen as the region's safe haven - rose to a two-week high of 0.46 per cent.

Italy's government bond yields, meanwhile, fell 4-6 basis points across a range of maturities and Italian stocks rose 1.42 per cent after the government won a no-confidence vote in the upper house. The government would have had to resign had it lost the vote.

Italy's 10-year bond yield was last down 7 bps at 3.34 per cent.

Spanish bond yields pulled back from new lows later in the session after a Spanish court ruled that banks are not required to pay stamp duty on mortgages.

The rally helped to narrow the gap between Spanish yields and German bonds to its tightest in 3-1/2 weeks.

New supply also weighed on the market. Germany sold 2.4 billion euros of 10-year bonds, with investors placing orders of 3.4 billion euros.

France, Spain and Ireland are due to sell some 14 billion euros of bonds between them on Thursday.

Commodities

Oil rebounded to $US73 a barrel after falling to its lowest since August, supported by a report that Russia and Saudi Arabia are discussing whether to cut crude output next year.

Zinc prices fell to a seven-week low on expectations that a supply crunch will ease. Benchmark zinc on the London Metal Exchange (LME) closed down 1.8 per cent at $US2455 a tonne after touching $US2445, the lowest since September 21.

"Smelter margins in China are picking up and the expectation is that production is set to trend higher into year-end," said Deutsche Bank analyst Nick Snowdon. "There has been a big build in (zinc) concentrate stocks (in China) in the last quarter or so ... with treatment charges picking up and prices stabilising there's a clear incentive for smelters to ramp up output," he said.

Prices of zinc, used to galvanise steel, fell 26 per cent over June-August but have recovered from August's low of $US2283. China is the biggest producer and consumer of zinc.

China's exports of aluminium raw material alumina last month were roughly equal to September's bumper volumes, the president of Aluminium Corp of China said.

LME copper closed down 0.1 per cent at $US6153 a tonne, aluminium finished 1.7 per cent higher at $US1984.50, lead rose 1 per cent to $US1927.50, tin ended unchanged at $US19,050 and nickel rose 0.4 per cent to $US11,820

Australian Sharemarket

Australian shares advanced on Wednesday, paced by bank shares, as the US midterm results were declared and landed in line with market expectations.

The benchmark S&P/ASX 200 Index closed 21.7 points, or 0.4 per cent, higher at 5896.9 while the broader All Ordinaries rose 23.3 points, or 0.4 per cent, to 5982.

The market fell by as much as 30 points just before midday before rallying later in the session as the results of the US midterms came through.

The major banks lifted the index. ANZ led the four majors, climbing 1.2 per cent to $26.45, Westpac rose 1 per cent to $27.18, NAB advanced 0.8 per cent to $25.87 and Commonwealth Bank closed trade at $69.35, up 0.6 per cent.